European banks raise more capital before ECB stress test: report

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The new European Central bank (ECB) headquarters are pictured in Frankfurt, September 11, 2014. REUTERS/Ralph Orlowski

LONDON (Reuters) - Euro zone banks have raised 35 percent more capital ahead of the European Central Bank’s (ECB) latest stress test than they had set aside before the 2011 review, according to a report published by law firm Linklaters.

The euro zone’s 130 most important banks are set to find out on Oct. 26 how they have fared in the ECB’s landmark review, which is designed to banish lingering doubts about whether lenders value assets properly and are strong enough to withstand another recession.

Linklaters said the euro zone banks have raised 35 billion euros ahead of the review, a figure that could rise to nearly 50 billion euros ($63.2 billion) by the end of the year.

Reuters’ own research showed the euro zone’s 20 listed banks had increased equity by 4 percent, or 26 billion euros, in the first half of this year and had put a similar amount into loan loss provisions.

Linklaters’ data includes one billion euros raised by Portugal’s bailed-out Banco Espirito Santo which is no longer featured in the ECB’s assessment.

The lawfirm’s research also showed that just over one quarter of the 66 banks in the least capitalized jurisdictions had successfully raised capital in 2014.

“New capital has not been raised evenly among those countries that needed it most ... suggesting that some banks may yet suffer a capital shortfall,” said Edward Chan, banking partner at Linklaters.